Want to be Hungarian? Buy some bonds

Marton Dunai

3 Min Read

BUDAPEST (Reuters) - Lawmakers in indebted European Union member Hungary are waving the prospect of a passport at well-heeled foreign investors.

A dealer consults with a client in the trading room of investment house BudaCash in Budapest January 5, 2012. Hungary pledged on Thursday to seek a fast agreement with international lenders to shore up its financial markets as the forint currency and bonds plunged further in a deepening crisis due to the government's widely-criticised policy course. REUTERS/Bernadett Szabo

Proposed legislation listed on parliament’s website would grant permanent residency and ultimately Hungarian citizenship to outsiders who buy at least 250,000 euros ($322,600) worth of special government bonds.

Hungarian passport holders are entitled to live and work throughout the European Union.

The move, backed by the ruling government party, is designed to attract new investors, especially from China.

Hungary has billions of euros worth of foreign currency debt maturing in the next few years and has explored a variety of ways to refinance.

Its plans include selling euro-denominated bonds to domestic buyers and trying to attract major new investors from Asia. Selling debt in western bond markets would happen only after tricky talks with international lenders wrap up, the government has said.

Budapest has asked for a financing backstop from the EU and the International Monetary Fund, but talks are dragging on and analysts see only a 50 percent chance of a deal.

The proposed legislation calls for the debt management office to issue special “residency bonds” to foreigners. Holders of at least a quarter of a million euros’ worth of the paper would get preferential immigration treatment.

“The goal of the modification is to create the institution of ‘investor residency’ in Hungary,” the lawmakers who put forth the legislation wrote in their proposal.

“The proposal ties gaining citizenship to buying bonds because it intends to aid state financing this way,” they wrote. “Other investments from those applying for such residency could boost the real estate, retail and investment markets.”

One of the authors of the proposal said Chinese investors were specifically targeted.

“The Chinese have articulated repeatedly that we should help their Hungarian investments,” ruling party lawmaker Mihaly Babak told the daily Nepszabadsag. “If someone is a Hungarian citizen they have more (investment) opportunities.”

“The condition of a preferential process is the purchase of 250,000 euros worth of bonds with a five year maturity ... We can attract capital from the so-called Third World this way and also finance reducing state debt.”